5 Reasons Companies Should NOT Be Hesitant To Move to a Private Exchange
The team at Employee Benefits News recently shared an article about why businesses may be hesitant to consider a private exchange for their employee benefits needs. With our experience successfully implementing Lawley Marketplace, our private benefits exchange, in over 100 companies over the last few years, we feel that now is the perfect time for companies to learn about and consider a private exchange. Below are responses to the points made from what we have seen.
1. Fear of the Unknown
“This is a fear of the unproven; the unknown is employers don’t know if private exchanges contain long-term cost savings, Marianne Fazen, executive director of the Dallas-Fort Worth Business Group on Health, says.
Through Lawley Marketplace, cost savings comes from helping an employer group understand and adapt a defined contribution model, which leads to their employees becoming more engaged in the benefit selection process. With a defined contribution model, the employer gives each employee a set amount of money with which they can allocate to their benefits instead of paying for a percentage of each plan. This allows the employers to budget their contribution around what they can afford each renewal while giving the employee the ultimate choice in choosing their benefits, making it a buying decision when purchasing their plans. By putting the decision in the employee’s hands, and coupling that with the decision support analysis through the Marketplace, the employee is encouraged to purchase the most cost-effective plan. This can lead to more appropriate utilization, which would ultimately help keep costs and premiums in check.
2. Early in the Process
“The private exchanges market “is very immature, not just for just for employers but also providers and insurers.” For example, Fazen says her employer groups tell her hospitals and physician groups have a lot of changes to make to their IT systems to accommodate a private exchange model.”
Though relatively new, large carriers on the medical and ancillary sides are jumping on board with private exchanges. Carriers are designating teams of employees to running departments specifically dealing with private exchanges. By allocating these resources, carriers are showing that they see the growth of this section of delivering benefits.
In terms of technological needs, with the Lawley Marketplace, there is no IT support necessary beyond a computer and an internet connection. Employees can access the website, login, and complete the process from either their work or home computers without having to download and install any software.
3. Competitors
“Many of Fazen’s employer groups say they worry employees will leave for competitors who are not on a private exchange, since they feel they may not be getting a good deal or their employer is cutting costs by making the switch.”
With a private exchange, companies are able to offer a more diverse group of benefits that they may not normally meet the participation requirements on. With Lawley Marketplace, an employer can offer not just more health insurance plan options, but they can also offer a full array of ancillary coverages without any regard to minimum participation standards. A diverse portfolio of options is important to employees, and being able to offer more and the choice of which of those benefits are important can actually serve as a great retention tool for employers. Beyond choice, the exchange also offers complete transparency. It shows the employees the total cost of the plans along with what the employer is contributing. This transparency helps employees understand just how great the cost is to employers as opposed to only seeing what the deduction is from the pay each period.
4. Complexity
“One company’s HR department said, ‘My employee wants me to make the decision for them,’” Fazen says. “[Employees] are asking the benefit manager, ‘Which plan is right for me?’ They don’t know how to evaluate.””
Changing from the traditional model to a private exchange model will require guidance by the employers as well as the broker partner, but also can help educate an employee population. By coupling the decision support tool and educational open enrollment meetings, offering the appropriate guidance to the employees can easily be achieved. The system takes into account how much the employee can pay out-of-pocket for, what their expected costs over the year are and then aggregates that information and provides the employee with justification for why each plan is the most cost-effective when it is chosen for them. This also helps the employer move away from choosing which plans are right for their whole employee base and allows them to offer a wider array of plans that can fit the needs of each individual. This, again, falls in line with the idea of educating the employees to not just renew their plans as is each year, but become consumers and truly understand what they are purchasing. This can help save the employees and the company, money over time.
5. Political Instability
“Every year — or even every month — something changes, Fazen says. Employers have more uncertainty then anything, so, “wait and see is a safer route,” says Fazen.”
We have implemented Lawley Marketplace for companies with 30 employees as well as companies with over 1000 employees. The platform is the same, and accomplishes the same goals, but the environments and circumstances facing those groups are drastically different. With all the changes coming (expected and unexpected), now is the time to get ahead of the curve and proactively find a long-term solution for offering benefits to their employees. A private exchange allows the employer to get out of the business of picking plans for their employees and not knowing how to deal with increases every renewal. The only decision that needs to be made every year will be the level of contribution to employees. The exchange is a platform that has been built to accommodate these changes and can easily integrate new plans to meet legislative standard without changing the idea of how the platform works.
While private exchanges may be new, we have seen clients successfully introduce this innovative solution in almost every industry. To talk with our employee benefits team to see if a private exchange is right for your organization, click here.
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Adam Clouden
Employee Benefits Consultant
Adam specializes in consulting with small businesses across Rochester and New York on their employee health benefits needs. Through the use of Lawley's private benefits exchange, Lawley Marketplace, Adam helps companies control their benefits cost through a defined contribution model. Additionally, Lawley Marketplace helps provide employees greater choice in their benefits with a wide array of options they can choose from. Adam joined Lawley in 2014 as an Employee Benefits Consultant. He helps employers determine an effective employee benefits program through strategic plan placement and cost-control initiatives.
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